India

Urjit Patel took over as Governor of the Reserve Bank of India (RBI) on 4 September 2016. At 52 years of age, he is among the youngest to be appointed to the position. Hopefully this is indicative of a broader trend of appointing younger Indians to senior policymaking positions — in line with the nation’s youthful demographic profile.

The surprise announcement last week that Raghuram Rajan, Governor of the Reserve Bank of India, was stepping down sent shockwaves around the world. Rajan, a brilliant academic who came from the University of Chicago to take up the appointment under the Singh government, was credited with stabilising the economy and turning inflation around. He is an outspoken champion of both economic and social reform. When push came to shove, he chose to go.

After two years of the Modi government, the Indian economy presents a mixed picture. Despite claims that it is the fastest growing large economy in the world, doubts linger about its actual health.

These doubts stem from confusion about GDP estimates since the new series was announced in January 2015. Many seasoned observers continue to suggest that the growth in gross value added (GVA) recorded in these estimates overstates India’s actual economic performance. The macro estimates seem to strongly differ from micro phenomenon.

This week’s long-speculated departure of Indian central bank Governor Raghuram Rajan reflected the Indian government’s view that he was no longer welcome at the helm. However, it also reflects the challenges all central bankers face in driving an economy.

Post the news, there has been a lot of unnecessary hype about his exit and the likely impact on financial and forex markets, and in the longer-term, the stability of the Indian economy.

According to current IMF projections, India is now the fastest growing major economy in the world. In 2016, it is expected to grow over a full percentage point faster than China. This is a remarkable turnaround by any standard and especially impressive against the backdrop of a stagnant global economy.

In economic terms, the federal system was created with the intention of maximising economies of scale, while still providing public services to cater to people’s divergent preferences. However, there is more to federalism than just the economics.

In political terms, federalism involves building a strong national polity by combining sub-national entities and, in emotional terms, federalism provides a national bond while permitting multiple local identities to be retained.